Have Unpaid Credit Card Bills? Here's How Going for a Credit Card Balance Transfer Will help you
Having unpaid credit card debt is never a good idea. Actually, many people are aware that at 24%-26% per year (p.a.) or more, rates of interest on unpaid credit card bills can snowball quickly when left unpaid over a long time period.
What should you do if you have charged a large amount for your credit card and therefore are now looking to pay off your bills every month?
Traditional Way Of Paying Your Charge card Bill
Having overdue credit card bills isn't a good habit to have. As responsible charge card users, we have to recognise situations where we may have (unintentionally) spent more than we should, and now have difficulty in paying off outstanding credit card debt.
The next step would be to formulate an agenda. When it comes to overdue credit card bills, repaying it around you can every month could be the usual strategy that most people adopt, but it is not necessarily the best solution. This is because you're charged a higher charge card rate of interest close to 24% p.a. even during the months when you are paying your bill.
In short, when you are doing your utmost to reduce your principal balance due every month, high rates of interest continue to be applied to the remaining principal that has not yet been paid. In this scenario, the smarter way to deal with your credit card bill might be using a charge card balance transfer.
What Is really a Charge card Balance Transfer?
A credit card balance transfer, also referred to as a credit card funds transfer, is really a credit facility offered via your charge card. Rate of interest for balance transfer is usually 0% with a one-time processing fee for your chosen repayment tenure. Most charge card balance transfer promotions allow you to choose a repayment tenure of either 6 or 12 months.
Using a credit card balance transfer allows you to tap on the existing borrowing limit on your credit card, and effect a fund transfer from your charge card for your checking account, current account or charge card with any bank. These funds may then be used to purchase any unpaid charge card bill. For example, Standard Chartered Charge card Funds Transfer charges a processing fee of 1.99% (EIR: 4.12%) and 4.5% (EIR: 4.86%) with zero interest rate^.
How Does Charge card Balance Transfer Help Save You Money?
For example, if Cindy currently comes with an unpaid charge card bill of $10,000, she tries to pay her bill every month for the following 6 months. In so doing, she'd accrue interest on her outstanding principal every month (for the next 6 months) until she clears her debt. According to an illustrative effective interest rate of 24% p.a., this adds up to a substantial amount of as much as $1,200, if she pays the minimum monthly repayment amount over Six months.
As such, a much better alternative is for Cindy to consider credit cards balance transfer.
Here's how it operates:
# 1 Cindy takes a credit card balance transfer of $10,000 in a 6-month tenure. In line with the Standard Chartered Charge card Funds Transfer rate, she'll pay $199 in processing fees (1.99%).
# 2 She use the funds to cover her $10,000 charge card bill with no longer incurs interest on her behalf charge card bill.
# 3 She pays the minimum monthly payment required of 1% of the outstanding principal amount over the next 5 months. Each month, the minimum monthly payment is going to be lower than the previous month because the outstanding principal amount will disappear, with the monthly payment.
# 4 After the 6-month tenure, she repays the outstanding principal amount. She will not incur any interest for using charge card balance transfer (EIR from 4.12% p.a.).
Enjoy Interest Savings with A Charge cards Balance Transfer
Regardless of whether you utilize credit cards balance transfer or pay your bill each month, the $10,000 you have spent must be paid for.
Credit card balance transfers allow you to have interest-free funds on hand for any short-term period with a one-time processing fee. However, do observe that should you miss your monthly minimum repayment by the payment deadline, applicable finance charges or late payment fees will start working.
Ultimately – Credit card balance transfers, when used correctly, is definitely an efficient way to handle credit debt or repay other loans that you may have taken.
